I.

THE WTO DISPUTE RESOLUTION SYSTEM

1. Dispute Settlement under GATT and WTO

Understanding on Rules and Procedures Governing the Settlement of Disputes.
The main components of the WTO dispute settlement system are as follows:
1. Dispute Settlement Body (DSB)
2. Good Offices of the Director General
3. Expert Review Group (ERG)
4. Disputes Panel
5. The Appellate Body.
Dispute Settlement Body
The DSB is the body that has overall charge of the dispute settlement mechanism. It is in effect the General
Council in a different guise, and consists of a representative from each member. It is the DSB which must
ultimately decide whether or not a Member has broken any rules governing the WTO Agreement or one of the
Multilateral Trade Agreements. In carrying out this role, the DSB is variously assisted by the good offices of the
Director General, the Disputes Panel and the Appellate Body.
Good Offices of the Director General
The disputing parties can ask for his intervention. But, the advice of the Director General and his assistants is
not binding and cannot be cited in a later Disputes Panel report.
Disputes Panel
The Dispute Panel is established by the DSB, and consists of three to five independent panellists, with a
sufficiently diverse background and a wide spectrum of experience.( they could be government or non-
government individuals)
The task of the Disputes Panel is to investigate thoroughly the facts of the dispute, taking in to account the
terms of the particular agreement alleged to be breached. It must consult with both parties to the dispute in order
to gain the fullest understanding possible of the problem and should encourage them to reach a mutually
acceptable solution, if at all possible. Where the two parties to a dispute have failed to reach an acceptable
agreement during the investigation, the Disputes Panel will present a written report to the DSB setting out its
findings of fact based on relevant agreement provisions and its reasoning behind its recommendations.
Expert Review Group
Where a Dispute Panel is considering a matter of a particularly technical nature it may, with the consent of both
parties to the dispute, establish an ERG to provide it with assistance. The ERGs report is of an advisory nature
only, although it will obviously carry considerable weight when it comes to the Dispute Panel presenting its
overall findings to the DSB.

The Appellate Body

Where a party to a dispute disagrees with a Dispute Panel recommendation, it can appeal to a standing
Appellate Body, established by the DSB. The appeal, however, is limited to issues of law covered in the
Disputes Panel report and the legal interpretation developed by the Disputes Panel.
The Appellate Body is composed of seven people who will serve for a four year term. Only three of the seven
will serve on any one case. The Appellate representatives must be people of recognized standing in the field of
law and international trade and not be affiliated to any government. They are appointed on the basis of a joint
proposal forwarded by the Director General, the DSB Chairman and the Chairman of the General Council and
the Trade Councils.
Its proceedings will be confidential, based on information already provided in the dispute and without the
presence of either party. After having reviewed the evidence, the Appellate Body reports to the DSB. Its
findings must be accepted by the parties to the dispute unless the DSB decides, by consensus, not to adopt the
report.
Procedures of WTO disputes mechanism
Step1
The aggrieved Member should make a request for consultation with the offending Member. The request must be
sent to the DSB in writing.
Step2
A reply should be made by the offending Member within 10 days unless otherwise mutually agreed.
Consultations should commence within 30daysof the original request. In urgent situation involving perishable
goods the reply and commencement of consultations should take place within10days of the original request.
Step3
Where both parties agree the case can be brought before the Director General and the good offices procedure
may continue while the Disputes Panel process is in progress, provided both parties agree to it.
Step4
If no response to a request for consultations is received within 10days or, if the Consultations fail to achieve a
solution after 60days, the complainant can ask the DSB to establish a Disputes Panel to examine the case.
Step5
A Dispute Panel is to be constituted within 20 days of the DSBs decision to establish it. Where the parties to
the dispute cannot agree, within 20days, on the panel lists nominated by the Secretariat, the Director General in
conjunction with the Chairman of the relevant Council/Committee, will decide the appointments.
Step6
The DP should complete its examination of the case and produce a final report within six months and for urgent
cases such as those relating to perishable goods, within three months. It should never take more than nine
months.

It shall throughout the course of its investigations, to encourage the parties to the dispute to settle the matter
voluntarily.
Step7
After the DP has considered the written and oral evidence of both parties to the dispute it will distribute the
factual and argument sections of its report to the parties for their perusal. The parties will then submit their
written comments within a prescribed time period set by the panel.
Step 8
The DP shall provide the Interim report of its findings and conclusions to the parties and the parties can respond
to the interim report. If no response, then it will be considered as the final report.
Step 9
The final report is submitted to the DSB who should adopt it within 60days of issuance unless either one of the
parties to the dispute indicates that it intends to appeal or a consensus emerges in the DSB against adoption. It
involves circulation of report to the other Members, discussed and adopted.
Step10
Provided no appeal has been lodged against the DP report and that there is no consensus against adoption, the
DSB will automatically approve the Panels recommendations at the adoption meeting.
Step11
Appeal to the standing Appellate Body. The Appellate Body will review the existing evidence and should aim to
report to the DSB with its findings within 60 days and not more than 90days.
Step12
The DSB must adopt the Appellate Body report within 30days of issuance, unless there is consensus against
adoption. Both parties to the dispute are bound to accept, unconditionally, the recommendations of the Appellate
Body.
Step13
After the adoption of the Appellate Bodys recommendation, the offending party must state its intentions in
respect of the implementation of the DSBs recommendation.
Step14
The DSB will allow the offending party a reasonable period of time to implement the recommendations,
which should not normally exceed 15months.
Step15
If a party fails to comply with the recommendation within the set time, it must enter in to negotiations with the
complainant in order to decide on a mutually acceptable level of compensation.
Step16 (retaliatory action)

If no acceptable level of compensation has been agreed, the complainant may request authorization from the
DSB to suspend concessions or obligations due to the offending party under the particular agreement in
question.
Step17
The DSB should grant the request for suspension of concessions or obligations, within 30days unless there is a
consensus against doing so.
Step18 (Arbitration)
If the offending party objects to the level of suspension granted by the DSB, it can request that the matter be
sent to arbitration (consisting of original Dispute Panels members or an arbitrator appointed by Director
General). The arbitration process should be completed within 60days and its decision is final.
Step19
On request from the complainant, the DSB will then authorize the suspension of concessions as recommended
by the arbitration board, unless there is a consensus against so doing.
In principle, the DSB (or arbitration body) should authorize or recommend the suspension of concessions, in the
same sector of an agreement. However, if this is not practicable or does not produce the desired effect,
authorization may be granted to suspend concessions in a different sector of the same agreement or, where the
circumstances are serious enough , under another agreement.
WTO Dispute Settlement
One of the most remarkable and successful aspects of the WTO is its automatic and compulsory dispute
settlement system. It is one thing for countries to agree to a treaty and quite another to enforce compliance with
that treaty.
Under international law, states can only be brought before an international court or tribunal if they have
consented to the jurisdiction of that court or tribunal. In many cases, this implies that breach of a treaty cannot
be challenged in third-party adjudication, or that when a dispute arises it can be settled in a judicial fashion only
with the explicit consent of both parties.
In the WTO, the situation is dramatically different. Whenever a WTO member has a complaint against another
WTO member for any matter falling under any WTO covered agreement (as defined in DSU Article 1), it can
invoke the WTOs dispute settlement system, without needing the approval of the defending party. This remains
the case even if the matter raised not only involves trade but also more sensitive questions such as health or
environmental protection, public morals, or national security.
As compared to most other international adjudication regimes, WTO dispute settlement has detailed procedural
rules, an appellate process, and back-up arbitration mechanisms to deal with non-implementation and the
calculation of trade sanctions in response to continued non-compliance. Most important, WTO members have
frequently used the dispute settlement system (between 1995 and April 2011, 424 disputes have been filed) and
in the large majority of cases (with some notable exceptions) the system has managed to resolve the dispute.
A better understanding of the WTO dispute settlement system not only allows one to formulate and guide
complaints through the multiple stages of enforcing trade agreements at the WTO, be it in pursuit of

government or private client interests, but it also offers a fascinating study of state-to-state adjudication and
international law enforcement more broadly.
2. The World Trade Organisation (WTO): Features, Structures, Objective and Function of the WTO!
Introduction:
The establishment of the World Trade Organisation (WTO) as the successor to ,the GATT on 1 January 1995
under the Marrakesh Agreement places the global trading system on a firm constitutional footing with the
evolution of international economic legislation resulted through the Uruguay Round of GATT negotiations.
A remarkable feature of the Uruguay Round was that it paved the way for further liberalisation of international
trade with the fundamental shift from the negotiation approach to the institutional framework envisaged through
transition from GATT to WTO Agreement.
The GATT 1947 and the WTO co-existed for the transitional period of one year in 1994. In January 1995,
however, the WTO completely replaced the GATT. The membership of the WTO increased from 77 in 1995 to
127 by the end of 1996.
Features of the WTO:
The distinctive features of the WTO are:
i. Unlike the GATT, it is a legal entity.
ii. Unlike the International Monetary Fund (IMF) and the World Bank (WB) it is not an agent of the United
Nations.
iii. Unlike the IMF and the World Bank, there is no weighted voting, but all the WTO members have equal
rights.
iv. Unlike the GATT, the agreements under the WTO are permanent and binding to the member countries.
v. Unlike the GATT, the WTO dispute settlement system is based not on dilatory but automatic mechanism. It is
also quicker and binding on the members. As such, the WTO is a powerful body.
vi. Unlike the GATT, the WTOs approach is rule- based and time-bound.
vii. Unlike the GATT, the WTOs have a wider coverage. It covers trade in goods as well as services.
viii. Unlike the GATT, the WTOs have a focus on trade-related aspects of intellectual property rights and
several other issues of agreements.
ix. Above all, the WTO is a huge organisational body with a large secretariat.
Structure of the WTO:
The organisational structure of the WTO is outlined in the Chart 50.1.
The Ministerial Conference (MC) is at the top of the structural organisation of the WTO. It is the supreme
governing body which takes ultimate decisions on all matters. It is constituted by representatives of (usually,
Ministers of Trade) all the member countries.

The General Council (GC) is composed of the representatives of all the members. It is the real engine of the
WTO which acts on behalf of the MC. It also acts as the Dispute Settlement Body as well as the Trade Policy
Review Body.
There are three councils, viz.: the Council for Trade in Services and the Council for Trade-Related Aspects of
Intellectual Property Rights (TRIPS) operating under the GC. These councils with their subsidiary bodies carry
out their specific responsibilities
Further, there are three committees, viz., the Committee on Trade and Development (CTD), the Committee on
Balance of Payments Restrictions (CBOPR), and the Committee on Budget, Finance and Administration (CF A)
which execute the functions assigned to them by e WTO Agreement and the GC.
The administration of the WTO is conducted by the Secretariat which is headed by the Director General (DG)
appointed by the MC for the tenure of four years. He is assisted by the four Deputy Directors from different
member countries. The annual budget estimates and financial statement of the WTO are presented by the DG to
the CBFA for review and recommendations for the final approval by the GC.

Objectives of the WTO:

The purposes and objectives of the WTO are spelled out in the preamble to the Marrakesh Agreement.

In a nutshell, these are:

1. To ensure the reduction of tariffs and other barriers to trade.
2. To eliminate discriminatory treatment in international trade relations.
3. To facilitate higher standards of living, full employment, a growing volume of real income and effective
demand, and an increase in production and trade in goods and services of the member nations.
4. To make positive effect, which ensures developing countries, especially the least developed secure a level of
share in the growth of international trade that reflects the needs of their economic development.
5. To facilitate the optimal use of the worlds resources for sustainable development.
6. To promote an integrated, more viable and durable trading system incorporating all the resolutions of the
Uruguay Rounds multilateral trade negotiations.
Above all, to ensure that linkages trade policies, environmental policies with sustainable growth and
development are taken care of by the member countries in evolving a new economic order.
Functions of the WTO:
The WTO consisting a multi-faced normative framework: comprising institutional substantive and
implementation aspects.
The major functions of the WTO are as follows:
1. To lay-down a substantive code of conduct aiming at reducing trade barriers including tariffs and eliminating
discrimination in international trade relations.
2. To provide the institutional framework for the administration of the substantive code which encompasses a
spectrum of norms governing the conduct of member countries in the arena of global trade.
3. To provide an integrated structure of the administration, thus, to facilitate the implementation, administration
and fulfillment of the objectives of the WTO Agreement and other Multilateral Trade Agreements.
4. To ensure the implementation of the substantive code.
5. To act as a forum for the negotiation of further trade liberalisation.
6. To cooperate with the IMF and WB and its associates for establishing a coherence in trade policy-making.
7. To settle the trade-related disputes.
What is a WTO trade round?
WTO (GATT) negotiations often process multilaterally by packages. That means, WTO members negotiate on
several trade-related issues simultaneously in a certain period of time. The agreements, which constitute the
WTO rules, are typically reached by consensus among all members. Such a period of negotiations forms a WTO
trade round.

A new trade round is often launched when WTO members realize limits of existing rules in protecting their
rights and facilitating trades. These limits may become apparent when new problems stem from the existing
trade or when international trade develops into new areas. For example, the early GATT trade rounds dealt
mainly with tariff reductions. Consequently, only few tariff barriers are left by the start of Tokyo Round. People
then saw the influence of non-tariff barriers against trade and launched the Tokyo Round (1973-1979) to discuss
non-tariff measures. Then with the development of trade into service and intellectual property rights, the
Uruguay Round from 1986 to 1994 further included issues in services and intellectual property rights. Aware
that GATT rules are limited to trade in goods, the Uruguay Round also covered the topic of WTO's creation.
The current set of WTO rules was the outcome of Uruguay Round negotiations.
What are the advantages and disadvantages of negotiation through trade round?
I. Advantages:
The size of the package can mean more benefits because participants can seek and secure advantages across a
wide range of issues.
In a package, the ability to trade-off different issues can make agreement easier to reach because somewhere in
the package there is something for everyone.
Developing countries and other less powerful participants have a greater chance of influencing the multilateral
system in a trade round than in bilateral relationships with major trading nations.
II. Disadvantages:
The simultaneous negotiation in different areas necessarily includes issues that certain negotiator countries are
reluctant to address. These issues serve actually as conditions for the process of other issues beneficial to those
countries. This situation can put the developing countries at a disadvantage. The developing ones are anxious to
improve their economies through international trade. However, the prerequisites in human rights and
environment protection often make it difficult for them to address the most urgent issues in economic growth.
A brief history of past trade rounds
Because tariff was widely used as a tool to protect domestic industries and generate revenue, the early trade
rounds of GATT mainly focused on tariff issues. Main trade rounds include:
I. The First Round at Geneva, Switzerland, from April to October 1947, where the participants completed 123
negotiations and established 20 schedules containing the tariff reductions and bindings that became an integral
part of GATT.
II. The Second Round at Annecy, France, from April to August 1949, which led to 5,000 tariff concession and
the accession of ten more countries.
III. The Third Round at Torquay, England from September 1950 to April 1951, which lead to 8,700 tariff
concessions and accession of four more countries.
IV. The Fourth Round at Geneva in May 1956, which led to some $2.5 billion worth of tariff reductions;
V. The Dillon Round from September 1960 to July 1962, which led to about 4,400 tariff concessions covering
$4.9 billion of trade.

VI. The Kennedy Round from May 1964 to June 1967, which lead to concessions covering an estimated total
value of trade of about $40 billion.
VII. The Tokyo Round from September 1973 to November 1979 was a transitional period, covering both tariff
and non-tariff matters. In tariff issues, it talked about tariff reduction and bindings that covered more than $300
billion of trade in almost 5 years. It also resulted in a number of agreements in such non-tariff issues as subsidy,
dumping, government procurement, technical barriers to trade, customs valuation, import licensing, civil
aircraft, dairy and bovine meat.
VIII. The Uruguay Round from September 20, 1986 to April 15, 1994, further included tariffs and non-tariffs
measures, rules, services, intellectual property, dispute settlement, textiles, and agriculture. At the conclusion of
the Uruguay Round on April 15, 1994, GATT members signed the Marrakesh Agreement Establishing the WTO
in Marrakesh, Morocco. This Agreement defines the scope, functions and structure of the World Trade
Organization (WTO).
GATT
The international conference of 1944 which recommended the establishment of IMF(International Monetary
Fund) and World Bank and also recommended the establishment of ITO(International Trade Organisation) but
did not materialize, but in the year 1948 GATT was established.
International trading system, since 1948 was at least in principles, guided by the rules and procedures agreed to
the signatories to the GATT which was an agreement sign by the member nations, which where admitted on the
basis of there willingness to accept the GATT disciplines.
The primary objectives of GATT was to expand international trade by liberalizing so as to bring about all round
economic prosperity, the important objective are as follows as:-1) Raising standards of living.2) Ensuring full
employment and large and steady growing volume of real income and effective demand.3) Developing full use
of resources of the world.4) Expansion of production and international trade.
GATT has certain conventions and general principles governing international trade among countries that follows
the GATT agreement:

Any proposed change in the tariff or any type of commercial policy of a member country should not be
undertaken without the consultation with the other parties to the agreement.
The countries that adhear to get work towards the reduction of tariff and other barriers to the
international trade should be negotiated within the frame work of GATT.

BARRIERS -- a) TARIFF (Change in monetary value Quality ) b) NON TARIFF (Quantity of product and
services)
For the realisation of the objective GATT adopted the following:a) NON DISCRIMINATION- The principle of non-discrimination requires that no member country shall
discriminate between in the conduct of international trade, to ensure non-discrimination the members of GATT
to apply the principle of MFN(most favoured nation) status to all import and export duties. The GATT also
permit to member to adopt step to counter dumping and export subsidies.

b) PROHIBITION OF QUANTITATIVE RESTRICTIONS- GATT seek to prohibit quantitative restrictions

as far as possible and limit restrictions on trade to the less rigid tariffs, however certain exceptions to this
prohibition are granted to countries, confronted with balance of payment difficulties and to the developing
countries.
c) CONSULTATION- By providing a forum for continuing consultation, GATT has provided to resolve
disagreements through consultation.
Evaluation of GATT
When GATT was signed in the year 1947 only 23 nations were party to it. In the 1986, there were 117 were
members. One of the principle achievement of GATT was the establishment of forum for continuing
consultation.
GATT achieved considerable liberalization, few exception are as follow as:

Agricultural trade was an exception to the liberalizations. Trade in agricultural became progressively
more distorted by the support given to the farmers in agricultural sectors.
Another exception was textile: trade in textile was restricted by MFA. under MFA import of textile
items, to number of developed countries was restricted by quota.
Developing countries with balance of payment problem have been generally exempted from
liberalization.

The average level of tariff on manufactured products in industrial countries was brought down from 40% in
1947 to 3% in 1986.
The export of developing countries gained significantly less from the GATT agreement then did the export of
developed countries.
1986 uruguay round agreement of MTN
This was 8th round of multilateral trade organization which was held in September 1986. The first 6 round of
MTN(Multi Lateral Trade Negotiation) concentrated almost exclusively on reducing tariffs while the 7th round
which was the Tokyo round (1973-79). Moved on to tackle the non tariff barriers. The Uruguay round
agreement broaden the scope of MTN by including new areas.
1) General Agreement on Trade In Services (GATS).
2) Trade Related Aspects Of Intellectual Property and services. (TRIPS)
3) Trade Related Investment Measures (TRIMS)
GATT

WTO

1) GATT was adhoc and provisional.

1) WTO is permanent.

2) GATT has contracting parties.

2) WTO has members.

3) GATT system allows existing domestic, to continue even if it violated GATT agreement.
permit this.

3) WTO does not

4) GATT was less powerful and dispute settlement mechanism was less efficient.
and dispute settlement mechanism was more efficient.

4) WTO is more powerful

Following the uruguay round agreement GATT was converted from a provisional agreement into a
formal international organisation called World Trade Organisation with effects from 1st jan 1995, under
the old system there were two GATTS:1) GATT as an organisation.
2) GATT as an agreement.
IMPORTANT FEATURES OF URUGUAY ROUND AGREEMENT
1) Liberalization of trade in manufactures:Liberalization of trade and manufactured is achieved mostly by reduction of tariff and removing and steps non
tariff barriers.
a)

b)

Tariff Barriers:Expansion of tariff barriers.

Reduction in tariff rates.
Expansion of duty free access.
Non- Tariff Barriers:-

In the area of non-tariff barriers removal of VER (Voluntary Export Restraint) and MFA (Multi- Fibre
agreement) are considered as land mark achievement.
2) Liberalization of agricultural trade:One of the important feature of uruguay round agreement was the inclusion of agricultural in MTN. The
exclusion of agriculture from the previous round and its effective exemptions from the GATT discipline made
agriculture a highly protected centre. In the developed countries the important aspects of uruguay round
agreement on agriculture include:

Tariffication .
Tariff Binding.
Tariff cuts.
Reduction in Subsidies.
Prohibited subsidy.
Actionable Subsidy.
Non- Actionable Subsidy.

The general agreement on trade and service which extends multi-lateral rules and disciplines to services is
regarded as the land mark achievement of uruguay round . The GATS defines, services as the supply of
service from:# The territory of one member into the territory of other member. (Transport)
# In the territory of one member, to the service consumer of any other member.(Franchisee)

# By a service supplier of one member through the commercial presence in the territory of any other member.
(Tourism)
# By a service supplier of one member through the presence of natural persons of a member, in the territory of
any other member. (Foreign Consultant)
Among the most important obligation, is a most favoured nation obligation that essentially prevent countries
from discriminating among foreign suppliers of services.
Another obligation is a transparency requirement according to which each member country will publish all its
relevant laws and regulations, pertaining to services.
TRIM
Trade related investment measures refers to certain conditions or restrictions imposed by a government in
respect of foreign investment of the country. The agreement on TRIMS provide that no contracting party shall
apply any TRIM, which is in consistence with WTO, article.
Following TRIM are considered as in-consistence:1) Local content requirements.
2) Trade balancing requirement.
3) Foreign exchange balancing requirements.
4) Domestic sale requirements
The uruguay round agreement on TRIPS (trade related intellectual property) covers seven intellectual
property: Copy Right.
Patents
o Process.
o Products.
Trade Marks.
Geographical Indicators.
Industrial Layouts
Integrated Circuits.
Undisclosed Information Including trade Secrets.
Intellectual property rights has been defined as information with commercial value. They have been
characteristics as the composite of ideas, inventing and creative expression plus public willingness to bestowe
the status of the property on them and give their owners to exclude others from the use of protected subject
matter.

3. United Nations Commission on International Trade Law (UNCITRAL)

Origin
In an increasingly economically interdependent world, the importance of an improved legal framework for the
facilitation of international trade and investment is widely acknowledged. The United Nations Commission on
International Trade Law (UNCITRAL), established by the United Nations General Assembly by its resolution
2205 (XXI) of 17 December 1966, plays an important role in developing that framework in pursuance of its
mandate to further the progressive harmonization and modernization of the law of international trade by
preparing and promoting the use and adoption of legislative and non-legislative instruments in a number of key
areas of commercial law. Those areas include dispute resolution, international contract practices, transport,
insolvency, electronic commerce, international payments, secured transactions, procurement and sale of goods.
These instruments are negotiated through an international process involving a variety of participants, including
member States of UNCITRAL, which represent different legal traditions and levels of economic development;
non-member States; intergovernmental organizations; and nongovernmental organizations. Thus, these texts are
widely acceptable as offering solutions appropriate to different legal traditions and to countries at different
stages of economic development. In the years since its establishment, UNCITRAL has been recognized as the
core legal body of the United Nations system in the field of international trade law.
Membership
Members are selected from among States Members of the United Nations. UNCITRALs original membership
comprised 29 States and was expanded by the General Assembly of the United Nations in 1973 to 36 States and
again in 2002 to 60 States. The expansion reflected the broader participation and contribution by States beyond
the then existing member States and stimulated interest in UNCITRALs expanding work programme.
Structured to ensure that the various geographic regions and the principal economic and legal systems of the
world are represented, the 60 member States include 14 African States, 14 Asian States, 8 Eastern European
States, 10 Latin American and Caribbean States and 14 Western European and other States. The General
Assembly elects members for terms of six years; every three years the terms of half of the members expire.
Uncitral is:

Coordinating the work of organizations active and encouraging cooperation among them.

Promoting wider participation in existing international conventions and wider acceptance of existing
model and uniform laws.

Preparing or promoting the adoption of new international conventions, model laws and uniform laws
and promoting the codification and wider acceptance of international trade terms, provisions, customs and
practice, in collaboration, where appropriate, with the organizations operating in this field.

Promoting ways and means of ensuring a uniform interpretation and application of international
conventions and uniform laws in the field of the law of international trade.

Collecting and disseminating information on national legislation and modern legal developments,
including case law, in the field of the law of international trade.

Establishing and maintaining a close collaboration with the UN Conference on Trade and development.

Maintaining liaison with other UN organs and specialized agencies concerned with international trade.

Convention
The Convention is an agreement among participating states establishing obligations binding upon those States
that ratify or accede to it. A convention is designed to unify law by establishing binding legal obligations. To
become a party to a convention, States are required formally to deposit a binding instrument of ratification or
accession with the depository. The entry into force of a convention is usually dependent upon the deposit of a
minimum number of instruments of ratification.
UNCITRAL texts
Convention on the Limitation Period in the International Sale of Goods, 1974 (New York)
UNCITRAL Arbitration Rules (1976)
United Nations Convention on the Carriage of Goods by Sea, 1978 (Hamburg)
United Nations Convention on Contracts for the International Sale of Goods, 1980 (Vienna)
UNCITRAL Conciliation Rules
Recommendations to assist arbitral tribunals and other interested bodies with regard to arbitrations under the
UNCITRAL Arbitration Rules
Provisions on a universal unit of account and on adjustment of the limit of liability in international transport
conventions
Uniform Rules on Contract Clauses for an Agreed Sum Due upon Failure of Performance
Recommendations to Governments and international organizations concerning the legal value of computer
records
UNCITRAL Model Law on International Commercial Arbitration (1985)
UNCITRAL Legal Guide on Electronic Funds Transfers
UNCITRAL Legal Guide on Drawing Up International Contracts for the Construction of Industrial Works
United Nations Convention on International Bills of Exchange and International Promissory Notes (1988)
United Nations Convention on the Liability of Operators of Transport Terminals in International Trade (1991)
UNCITRAL Model Law on International Credit Transfers (1992)
UNCITRAL Legal Guide on International Countertrade Transactions (1992)
UNCITRAL Model Law on Procurement of Goods, Construction and Services with Guide to Enactment
(1994)
United Nations Convention on Independent Guarantees and Stand-by Letters of Credit, 1995
UNCITRAL Model Law on Electronic Commerce with Guide to Enactment (1996)
UNCITRAL Notes on Organizing Arbitral Proceedings

 UNCITRAL Model Law on Cross-Border Insolvency with Guide to Enactment (1997)

UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects (2000)
UNCITRAL Model Law on Electronic Signatures with Guide to Enactment (2001)
United Nations Convention on the Assignment of Receivables in International Trade (2001)
UNCITRAL Model Law on International Commercial Conciliation with Guide to Enactment (2002)
UNCITRAL Model Legislative Provisions on Privately Financed Infrastructure Projects (2003)
UNCITRAL Legislative Guide on Insolvency Law (2004)
United Nations Convention on the Use of Electronic Communications in International Contracts (2005)
Short notes
1. Foreign direct investment
Foreign direct investment (FDI) refers to an investment in or the acquisition of foreign assets with the intent to
control and manage them. Companies can make an FDI in several ways, including purchasing the assets of a
foreign company; investing in the company or in new property, plants, or equipment; or participating in a joint
venture with a foreign company, which typically involves an investment of capital or know-how.
FDI is primarily a long-term strategy. Companies usually expect to benefit through access to local markets and
resources, often in exchange for expertise, technical know-how, and capital. A countrys FDI can be both inward
and outward. As the terms would suggest, inward FDI refers to investments coming into the country and
outward FDI are investments made by companies from that country into foreign companies in other countries.
The difference between inward and outward is called the net FDI inflow, which can be either positive or
negative.
Governments want to be able to control and regulate the flow of FDI so that local political and economic
concerns are addressed. Global businesses are most interested in using FDI to benefit their companies. As a
result, these two playersgovernments and companiescan at times be at odds. Its important to understand
why companies use FDI as a business strategy and how governments regulate and manage FDI.
There are two forms of FDIhorizontal and vertical.
Horizontal FDI occurs when a company is trying to open up a new marketa retailer, for example, that builds
a store in a new country to sell to the local market.
Vertical FDI is when a company invests internationally to provide input into its core operationsusually in its
home country. A firm may invest in production facilities in another country.
When a firm brings the goods or components back to its home country (i.e., acting as a supplier), this is referred
to as backward vertical FDI. When a firm sells the goods into the local or regional market (i.e., acting as a
distributor), this is termed forward vertical FDI. The largest global companies often engage in both backward
and forward vertical FDI depending on their industry.

Many firms engage in backward vertical FDI. The auto, oil, and infrastructure (which includes industries related
to enhancing the infrastructure of a countrythat is, energy, communications, and transportation) industries are
good examples of this. Firms from these industries invest in production or plant facilities in a country in order to
supply raw materials, parts, or finished products to their home country. In recent years, these same industries
have also started to provide forward FDI by supplying raw materials, parts, or finished products to newly
emerging local or regional markets.
There are different kinds of FDI, two of whichgreenfield and brownfieldare increasingly applicable to
global firms.
Greenfield FDIs occur when multinational corporations enter into developing countries to build new factories
or stores. These new facilities are built from scratchusually in an area where no previous facilities existed.
The name originates from the idea of building a facility on a green field, such as farmland or a forested area. In
addition to building new facilities that best meet their needs, the firms also create new long-term jobs in the
foreign country by hiring new employees. Countries often offer prospective companies tax breaks, subsidies,
and other incentives to set up greenfield investments.
A brownfield FDI is when a company or government entity purchases or leases existing production facilities to
launch a new production activity. One application of this strategy is where a commercial site used for an
unclean business purpose, such as a steel mill or oil refinery, is cleaned up and used for a less polluting
purpose, such as commercial office space or a residential area. Brownfield investment is usually less expensive
and can be implemented faster; however, a company may have to deal with many challenges, including existing
employees, outdated equipment, entrenched processes, and cultural differences.

2. Bill of Lading
A bill of lading is a type of document/receipt issued by the ship-owner or by the master, captain of the ship or
other agent after the goods have been placed on board for being carried to a specific destination. The term
derives from the noun bill, a schedule of costs for services supplied or to be supplied, and from the verb to
lade which means to load a cargo onto a ship or other form of transport. Although bill of lading involves the
use of at least two different modes of transport from road, rail, air, and sea.
A bill of lading is used when the goods shipped from only a part of the cargo of a general ship. It must be
stamped and signed by ship-owner or his agent. [The An Jang (2003) 45 SLR 348].
There are two basic types of bill of lading.
1. The straight bill.
2. The order bill.
A straight bill of lading is a non-negotiable document, made out to a specifically named consignee, from
which the shipping company acknowledges receipt of the freight and agrees to move it to its destination.
An Order bill of lading is a document that is made out to the order of the foreign importer or its bank, or the
order of the export firm, its bank, or another designated party.
The bill of lading must contain the following information.

Name of the shipping company

Flag of nationality
Shipper's name
Order and notify party
Description of Goods
Gross/net/tare weight,and
Freight rate/Measurements and total freight of goods.

The bill of lading has three characteristics:

(1) Receipt for the goods shipped.
(2) Evidence of the terms of the contract of affreightment.
(3) Document of title to the goods specified in the Bill of Lading.
3. DEFINITION OF 'DUMPING'
In international trade, the export by a country or company of a product at a price that is lower in the foreign
market than the price charged in the domestic market. As dumping usually involves substantial export volumes
of the product, it often has the effect of endangering the financial viability of manufacturers or producers of the
product in the importing nation. Dumping is also a colloquial term that refers to the act of offloading a stock
with little regard for its price.
What is anti dumping? What is its purpose in International Trade?
Dumping is said to occur when the goods are exported by a country to another country at a price lower than its
normal value. This is an unfair trade practice which can have a distortive effect on international trade. Anti
dumping is a measure to rectify the situation arising out of the dumping of goods and its trade distortive effect.
The purpose of anti dumping duty is to rectify the trade distortive effect of dumping and re-establish fair trade.
The use of anti dumping measure as an instrument of fair competition is permitted by the WTO. In fact, anti
dumping is an instrument for ensuring fair trade and is not a measure of protection per se for the domestic
industry. It provides relief to the domestic industry against the injury caused by dumping.
"Dumping" is defined as a situation in which the export price of a product is lower than its selling price in the
exporting country. A bargain sale, in the sense of ordinary trade, is not dumping. Where it is demonstrated that
the dumped imports are causing injury to the importing country within the meaning of the WTO Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 ("Anti-dumping
Agreement"), pursuant to and by investigation under that Agreement, the importing country can impose antidumping measures to provide relief to domestic industries injured by imports.1
The country's imposition of an anti-dumping duty is determined by the dumping margin--the difference between
the export price and the domestic selling price in the exporting country. By adding dumping margin to export
price, the dumped price can be rendered a "fair" trade price.
When it is impossible to obtain a comparable domestic price because there are none or low volume sales in the
ordinary course of trade in the domestic market, either export prices to third countries or a "constructed value"
is used in price comparison. A "constructed value" is the cost of production in the country of origin plus a
reasonable amount for administrative, selling and general costs and for profits.

Similarly, when the export price is found to be unreliable, the price at which the product is first resold to
independent buyers, or another price according to a reasonable basis determined by the authorities may be used
in price comparison.

4. Most-favoured-nation treatment (MFN),

Also called normal trade relations, guarantee of trading opportunity equal to that accorded to the most-favoured
nation; it is essentially a method of establishing equality of trading opportunity among states by making
originally bilateral agreements multilateral.
As a principle of public international law, it establishes the sovereign equality of states with respect to trading
policy. As an instrument of economic policy, it provides a treaty basis for competitive international transactions.
In the early 17th century, several commercial treaties incorporated most-favoured-nation provisions. The AngloFrench treaty negotiated in 1860 by Richard Cobden and Michel Chevalier, which established interlocking tariff
concessions that extended most-favoured-nation treatment worldwide, became the model for many later
agreements.
Such treatment has always applied primarily to the duties charged on imports, but specific provisions have
extended the most-favoured-nation principle to other areas of international economic contactfor example, the
establishment of enterprises of one countrys nationals in the territory of the other; navigation in territorial
waters; real and personal property rights; intangible property rights such as patents, industrial designs,
trademarks, copyrights, and literary property; government purchases; foreign-exchange allocations; and
taxation.
There are two forms of most-favoured-nation treatment: conditional and unconditional. The conditional form
grants gratuitously to the contracting party only those concessions originally made gratuitously to a third party
and grants concessions originally obtained as part of a bargain only under equivalent conditions or in return for
equivalent gains. Under the unconditional form, any tariff concession granted to a third party is granted to the
contracting party, a principle that was included in the 1948 General Agreement on Tariffs and Trade (GATT)
and in 1995 in the agreement establishing the World Trade Organization (WTO).
Application of most-favoured-nation treatment was limited in the past by the practice of granting concessions to
the principal supplier country in an effort to obtain reciprocal concessions or by reclassifying and minutely
defining items in the customs tariff so that a duty concession, while general in form, applies in practice to only
one country.
International concern with most-favoured-nation treatment decreased as new devices of trade regulation (import
quotas, exchange control, and state trading) became greater obstacles to trade than tariffs. The discretionary and
often arbitrary nature of such regulations rendered any specific guarantee of equal trading opportunity
impossible.

5. European Union
The European Union (EU) is an economic and political federation consisting of twenty-seven member countries
that make common policy in several areas.

The EU was created in 1993 with the signing of the Treaty on European Union, commonly referred to as the
Maastricht Treaty, but it was preceded by various European organizations that contributed to the development of
the EU.
The EU represents the latest and most successful in a series of efforts to unify Europe, including many attempts
to achieve unity through force of arms, such as those seen in the campaigns of Napoleon Bonaparte and World
War II.
The field of international trade is one in which the European Union has an important position in the world.
While there are, of course, other aspects of international relations in which the Union is active the common
foreign and security policy and development policy come quickly to mind, those fields are still dominated by
the Member States acting individually (even if in a somewhat coordinated manner).
The Union is responsible for the common commercial policy and as such it is the key player on the world stage
when European trade interests are in play. That is not to say that the Member States are uninvolved.
The Commission is required to consult them regularly, but it is the Commission that is the international
negotiator. It deals with three categories, (i) the external relations power of the Community; (ii) key issues
facing the Unions attempt to launch a new round of trade negotiations; and (iii) matters related to EU-U.S.
trade relations.
There are two aspects of the Unions involvement in international trade matters that are particularly important at
this moment. First, the Union is currently the principal proponent for a new broad-based round of international
trade negotiations under the auspices of the WTO. Second, its trading relationship with the United States has
undergone considerable stress as a result of a series of disputes, most of which have ended up before the WTOs
dispute settlement system.

5. Electronic transactions
An electronic transaction is the sale or purchase of goods or services, whether between businesses, households,
individuals, governments, and other public or private organisations, conducted over computer-mediated
networks. The goods and services are ordered over those networks, but the payment and the ultimate delivery of
the good or service may be conducted on or off-line.
E-transactions include a wide variety of corporate activities, ranging from intranet document-sharing systems to
online purchases of physical goods. Companies should have compliance procedures in place to avoid disruption
by regulatory agencies and to minimize potential liability for noncompliance.
For businesses that want to set up a process to implement any type of electronic transaction on a repetitive basis,
whether via a Web site, by e-mail, by traditional electronic data interchange, or even in person, a variety of
fundamental issues must be addressed to ensure that the resulting process is legally valid and enforceable.
Electronic Requirements

Agreement to Engage in Electronic Transactions

Consumer Consent to Receive Certain Information in Electronic Form
Transaction Information Disclosure Requirements.
Transaction Record Accessibility Requirements
Signature Requirements

Method of Electronic Delivery

Electronic Record Format Requirements
Electronic Record Retention Requirements

The UNCITRAL Model Law on Electronic Commerce (MLEC) is intended to facilitate commerce via the use
of modern means of communications and storage of information.
The MLEC is based on the establishment of a functional equivalence in electronic media for paper-based
concepts such as "writing", "signature" and "original".
The MLEC established rules for the formation and validity of contracts concluded with electronic means and
for the attribution and retention of data messages.
Fundamental principles of UNCITRAL texts on electronic transactions
Non-discrimination- A communication shall not be denied validity on the sole ground that it is in electronic
form.
Functional equivalence- Purposes and functions of paper-based requirements may be satisfied with electronic
communications, provided certain criteria are met.
Technological neutrality - Equal treatment of different technologies (EDI, e-mail, Internet, instant messaging,
fax, etc.) Possibility to have detailed provisions on technology requirement in the regulations implementing ecommerce legislation.